Pound Sterling - UK Markets

The Bank's Financial Stability report released this morning has pitched the cost of the credit crunch at $2.8 trillion dollars and the closest the British economy has come to collapse since WW1. Brown has also pledged to increase government borrowing to stave off the worst of recession, realigning debt as a proportion of GDP when recovery begins.  

The report is cautiously optimistic of the effect government lending will have for markets. Libor rates show Sterling liquidity is gradually on the improve and the MCSI, despite a general bearish trend this week, has recovered 1.4% after having fallen 29% this month.

The Pound is down to 1.2435 against the Euro and declined against a basket of major currencies with the exception of the Australian and New Zealand Dollars for the second day running.

Sterling lending data and new mortgage approvals due tomorrow will provide a picture of the domestic economy. Economists are predicting “subdued” results for quarter 4 with recovery in 2009 when the full effect of recent government interventions are made evident. 

US Dollar - US Markets

The US Dollar dipped slightly overnight in anticipation of the Fed's interest rate decision but remains strong amongst its foreign counterparts. A 0.5-1% base rate cut is widely expected.

All eyes are on the data released from the US this week which could be the key factor in reversing the bearish trend in equity markets. New home sales, up by 2.7% yesterday are a positive indication of consumer confidence returning in the US.

The Fed interest rate decision is due tomorrow with GDP and personal spending data due on Thursday.

Euro - European Markets

The Euro is broadly unchanged overnight, bar a slight depreciation against the safe haven currencies US Dollar, Swiss Franc and the Japanese Yen.

Some positive news from the Eurozone comes in the form of German consumer confidence figures, which have bucked the general trend and ticked up one point on their November index. 

BP stocks also climbed 7.3% after posting record profits in the third quarter, having gained 83% on their profits in the second quarter.

The EMU consumer, economic and industrial confidence figures are due on Thursday.